Growth in borrowing across the economy slowed in March for the first time since last summer, despite an increase of nearly €5 billion in loans over the month.

Central Bank figures show that the annual increase in consumer and business borrowing fell from 26.9 per cent in February to 25.4 per cent in March.

The decline in overall borrowing came as mortgage lending rebounded in March after two months of what the Central Bank called "relatively weak demand".

Some €1.5 billion was advanced in homeloans over the month, although the underlying rate of growth in the area continued to fall back.

The drop from an annual increase of 26 per cent in February to 25.8 per cent in March reaffirms earlier evidence that mortgage lending may have peaked.

The March figure is two percentage points lower than the peak in lending growth of 27.8 per cent reached last July.

The numbers will offer some comfort to the Central Bank, which has repeatedly voiced concern over the economy's heavy exposure to borrowing.

Bank of Ireland's chief economist, Dr Dan McLaughlin, said yesterday that the slower mortgage growth was consistent with other data showing a decline in house price growth. As property inflation eases, mortgages do not need to grow at so fast a pace, he noted.

Nearly two-thirds of the total €4.9 billion increase in borrowing last month was drawn from non-mortgage credit, or loans other than mortgages.

This type of lending to the private sector climbed by 23 per cent year-on-year, again marking a decline on the previous month.

Part of the slowdown in the pace of growth was attributed to a base effect, which saw a surge in borrowing in March 2004.

This "particularly large increase" in the same month of last year was due mostly to borrowing within the banking sector.

A breakdown of the non-mortgage growth in March shows that term loans rose €2.4 billion, while loans up to and including one year grew by €839 million. Commercial mortgages climbed by €123 million while overdrafts expanded by €115 million.

Bloxham chief economist, Alan McQuaid said demand for borrowing is unlikely to ease off significantly until euro-zone interest rates increase from their current historical low of 2 per cent.

A rate hike of at least a quarter of a percentage point is likely before the end of the year, he believes.